The opening of the latest from Paul Krugman reminds me of how some litigation attorneys treat “expert opinion”:
Congress has always had a soft spot for “experts” who tell members what they want to hear, whether it’s supply-side economists declaring that tax cuts increase revenue or climate-change skeptics insisting that global warming is a myth.
The problem of expert opinion for hire is just one issue discussed by William Simon in his The Market for Bad Legal Advice: Academic Professional Responsibility Consulting as an Example. Paul notes the expert opinion of Michael Masters – a hedge fund manager. Excuse me? A hedge fund manager would not likely be qualified as an expert witness on oil prices by any competent judge. Paul continues:
Right now, the welcome mat is out for analysts who claim that out-of-control speculators are responsible for $4-a-gallon gas … Republicans have been at least as willing as Democrats to denounce evil speculators. But it turns out that conservative faith in free markets somehow evaporates when it comes to oil. For example, National Review has been publishing articles blaming speculators for high oil prices for years, ever since the price passed $50 a barrel. And it was John McCain, not Barack Obama, who recently said this: “While a few reckless speculators are counting their paper profits, most Americans are coming up on the short end — using more and more of their hard-earned paychecks to buy gas.” Why are politicians so eager to pin the blame for oil prices on speculators? Because it lets them believe that we don’t have to adapt to a world of expensive gas … This suggests that growing demand from emerging economies, not speculation, is the real story behind rising prices of raw materials, oil included. In any case, one thing is clear: the hyperventilation over oil-market speculation is distracting us from the real issues. Regulating futures markets more tightly isn’t a bad idea, but it won’t bring back the days of cheap oil. Nothing will. Oil prices will fluctuate in the coming years — I wouldn’t be surprised if they slip for a while as consumers drive less, switch to more fuel-efficient cars, and so on — but the long-term trend is surely up. Most of the adjustment to higher oil prices will take place through private initiative, but the government can help the private sector in a variety of ways, such as helping develop alternative-energy technologies and new methods of conservation and expanding the availability of public transit. But we won’t have even the beginnings of a rational energy policy if we listen to people who assure us that we can just wish high oil prices away.
An outward shift of the demand curve as an explanation for rising prices? Whoa – what a novel concept!